Home Federal Bancorp/LA’s common shares will need to reach $21 to achieve average annual stock market performance of 9.0% over the next 6 years. Home Federal Bancorp/LA’s stock price will need to reach $24 by 2029 to achieve upper quartile performance. What is the market’s view of Home Federal Bancorp/LA’s future operating performance as reflected in the current price of $12?
Executive Summary
- Key Home Federal Bancorp/LA characteristics: very high profitability, high expected growth, high stability, and low financial strength. A big positive influence on Home Federal Bancorp/LA’s valuation is its superior Growth.
- Low valuation, average shareholder returns. Current valuation levels are below average relative to the Home Federal Bancorp/LA Peer Group. Recent market returns have tracked the Home Federal Bancorp/LA Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Home Federal Bancorp/LA shares should reach a level of $35 by 2029 — an 22.5% per year total shareholder return. A 2029 stock price of $21 would reflect median performance and a price of $24 would be required to reach upper quartile performance.
- Growth has been Home Federal Bancorp/LA’s biggest valuation strength. Historical growth has been very high relative to the Home Federal Bancorp/LA Peer Group and forecasted growth is relatively very high. Equity Growth, EPS Growth, and Asset Growth have been superior. These factors have buoyed market perceptions of Home Federal Bancorp/LA. Home Federal Bancorp/LA’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Return on Equity is group leading. This factor has strengthened market perceptions of Home Federal Bancorp/LA. The company has below average cash and will have to work to generate attractive investment opportunities and improve valuation.
- Home Federal Bancorp/LA’s risk profile is unfavorable. Overall variability has been above average with above average revenue variability, relatively low E.P.S. variability, and very low stock price volatility. Financial Strength is below average and earnings’ expectations are unavailable. The debt/capital ratio has risen very significantly.
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